March 26, 2025 • 25 mins
Our aging population and housing supply—two of the country’s hottest topics. And right at the intersection of both? Retirement housing.
Scott Scoullar, CEO of Summerset, tells Garth Bray how the retirement village provider became New Zealand’s second-largest property developer—and the unique financial model that's helped them stay ahead of the market forces that have struck competitors.
With a rapidly growing elderly population, how is the retirement sector adjusting—and are we doing enough to expand facilities? Amid regulatory changes and looming aged care shortages, Scott tells us how Summerset’s ambitions are only growing, including big plans for continued expansion into Australia.
For more or to watch on YouTube—check out http://linktr.ee/sharedlunch
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Essentially by twenty forty the population goes from four hundred
thousand New Zealanders over seventy five to eight hundred thousand
New Zealanders over seventy five. It's massive change in gemographic
We're second largest home developer in New Zealand. I's aren't
think for a time, but is the largest home developer
in New Zealand. Yeah. Anything that can be done to speed stuff,
are your time efficient means I can building villages faster. Yeah,
(00:22):
the massive demographic push, I think you're going to find
that this is not enough retirement village operators in New
Zealand and fifteen years time and certainly there's going to
be not enough care be it's in New Zealand, which
is actually pretty sad.
Speaker 2 (00:36):
Krakoto. Welcome to Shared Lunch, brought to you by Shears's.
I'm Garth Bray and today we're here in Saint John's
in Auckland at the newest retirement village opened by Somerset.
Now that's one of the three big listed operators of
retirement villages in New Zealand, and we're here to speak
to the CEO Scott's Schooler. More than fifty thousand New
Zealanders call a retirement village home, but that is set
(00:57):
to rise as our population ages. So what are Sumrset's
plans to get a hit of that curve? Before I
head up to the Penthouse to hear here's some important
information you should always consider when investing.
Speaker 3 (01:10):
Investing involves the risk you might lose the money you
start with, we recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 2 (01:25):
Scott, thanks for having us to the Penthouse. From the
look of it, where are we bright now? What is
the spot and what can taust about it? Yes?
Speaker 1 (01:33):
So look we bought the site and s John's probably
twenty fifth day now and so it's been a long
journey for us to get to this point where it's
open and opened late last year. So yet it's going
to be home to break close to three hundred residents. Good,
so you're in a pink house. It's having there pretty
much for sites got three sixty degree of view start.
(01:55):
It's a lovely, lovely sites amazing as.
Speaker 2 (01:59):
Views and if you are looking to try to arrive
in this kind of place obviously going to have to
have a pretty good financial plan.
Speaker 1 (02:06):
Yes, so that's a lovely part about this collection. We
tried to sort of match like aspiration and make it
quite aspirational. So like hopefully when people been up here
they feel like it's buk turning up to a hotel.
It's at Fields Groove Formal. It has a lot appeal
to it. It's got flop fine dining and it's got cafe,
it's got heavy theaters, gyms, all the subur pools, things
(02:27):
you can think of. The vast majority of the product
probably arranges them about which there's a lot for parts
of New Zealand. But like an Auckland's actually in this
location is actually pretty portable because.
Speaker 2 (02:38):
You tend to match whatever offering you make here to
whatever local proppery prices are doing because that's where people
are coming from.
Speaker 1 (02:46):
Yeah, Essentially, like most people come into a time village
within either two situations, either within a five K radios
where they lived their lives or typically then they may
be chaking a choice to move from a completely different
location to be closer to family. But you'd find eighty
percent of people would be within five kilometers, so you
kind of want it to be highly affordable for those
people to be able to sell their home, put a
(03:06):
little bit of money in the bank and then come
in and use that money to sort of enjoy retirement life.
And so most of the time we're target ninety percent
eighty five to ninety percent of the medium house price
in terms of the products that we're building.
Speaker 2 (03:21):
It's interesting you mentioned that chain of needing to sell
before you come into a place like this, because obviously
the market's been a weabit so though probably more so
than anywhere here in Auckland. How is that showing up.
Speaker 1 (03:32):
Yeah, Look, I think your right to pickle on the
fact that I think people who's confidence to be able
to sell their house has been quite constrained in the
last twelve months, that hasn't really sort of borne out
in terms of their desire to come into a village.
So we've seen lots of inquiry, like we would have
seen more inquiry the last twelve months than we have
traditionally previously. So inquiries pretty by people's commitment to sales
(03:53):
contract is really high, but they've been constrained at ticks.
Why they're a bulleted sell our own home and so
look some of that as people take choice to sort
of sit on the beach and wake three months six months,
but until they feel like they can actually sell their house.
Sometimes we'll work with that resident to give them options
to come in. So it might be like we have
situations we will allow people to move in early. They
can move in whilst they're still selling their home, get settled,
(04:16):
which is really lovely for them, and then be out
of the house while they're selling it. And so you know,
at times we'll give them six months to do that,
and that gives them the confidence to sort of say, right,
I'm prepared to give that a go in some of
my house and look, at the end of that six
months period, if they still and sold their house, would
work with them. It's not like they're going to get
kicked out on the street, you know, like we want
them to be living life here. And so you're just
(04:38):
constantly working with people in their individual situations to figure
out how you can help facilitate them coming in. And
that's been hard. But with your economy in the last
sort of six twelve months, it's not as I said,
that people's desire to come and has changed. It's as
you're just helping them sort of make that transition.
Speaker 2 (04:53):
Those terms, Are they kind of a new response to
the conditions or is that something you've gone to before
in other times where things are tricky because you've been
around for a while, right as a company.
Speaker 1 (05:02):
Look, it's a good question. Most of them are things
that you've used in the past. So, like you know,
during COVID twenty twenty, it was the same sort of environment, right,
people were predicting housing market it was going to be terrible,
and to be honest, it wasn't actually as bad as
people predicted. But it's those same types of tools that
you pull out that just facilitate people to come into
a village.
Speaker 2 (05:20):
I guess if you can tell me a bit more
about Somerset particularly, like what would I see here that
I wouldn't see it another retirement village operator's place.
Speaker 1 (05:30):
Yeah, Look, there's a few parts I think, like in
terms of what we're proud of. Like the first one
is we sort of pride ourselves that you come and
live in a village where it's actually your home, so
we treated as residents' homes. So like when our staff
are here, they're ver even mindful of this is actually
people's homes that they're sort of working with them. I
think potentially that could be a different philosophy from other operators,
(05:51):
where it's sort of more like this is our village,
you're come to live with us, so you know, pretty
much we stand in the background, facilitated as much as
we can, but you know, almost try and be an
extended member of their family to help out and stuff.
But and so I think service like residents love their
lives in our villages. Ninety seven percent of our residents
are satisfied living in some set village, so we're very
(06:13):
proud of that. The second thing is we build on
a lot of Broadway locations, so you know, I think
a lot of Keywis have grown up with the six
and re scumiter section the grass. That's something we we
like and enjoy building. So you know you'll see us
in broad acre situations right throughout New Zealand. So we're
probably the most geographically diverse of any operator throughout New
(06:34):
Zealand and like to build homes that people can actually
enjoy but agree in space obviously, when you come to
a special place like this, you know you can't actually
do that because you can't get enough land bututical village.
But yeah, we are in a vertical village and we
sort of only build one of those, probably eading a
particular point in time, but most of the time it's
broad acre villages. And the bit I love about that
is that people got access to outdoor living pocket parks
(06:57):
like barbecue is you name it, like mini gulf driving ranges,
like there's just it's NonStop sort of ability for them
to exist things and so we'll it be vegetable gardens
is something the fever in and people's ability to then
jump out of their home out the back door and
kind of have their own little pattio area and stuff
(07:19):
they can enjoy, their own little grass patch they can
enjoys is quite special. So yeah, I think like there's
a couple of things there, like you know, and I
think probably the third thing i'd say is in kre
like you know, we have integrated villages with care access
on site and with that that's probably not that's pretty
typical for New Zealand. Look, it's quite different for Australia,
(07:41):
so we are quite different Australia on that regard. But
in New Zealand, like here, we try and produce quite small,
private homely care environments. So because when people are going
through the latter part of their life and they need
some care and support, I know, we feel like it's
really important that they feel that that's an environment they're
(08:03):
sort of safe, comfortable in. It's private, they have the
same nurse every day, they have the same care giver
every day, rather than a large hospital environment where each
day you might be experiencing a different person looking after you,
or you've got no privacy in the lounge because there's
forty other people in there. So small private care facilities
combined with broad acre living, combined with that sort of
(08:26):
like lovely sort of service environment that we create, I
think is kind of the three things that probably the
most important to someone.
Speaker 2 (08:33):
Sat. All right, how's that working for the financials? Can
you walk us through the numbers? I know you've you've
fived you're half year pretty recently, so they'll all be fresh.
I'm sure.
Speaker 1 (08:41):
Yeah. Look here last year, so we delivered our undern
profit result of to earn six million dollars. That was
up eight percent and to be honest, op eight percent
in what i'd probably are my working career anyway, it's
probably the hardest year I've experienced, and so for us
to deliver a result up eight percenters, we feel is
pretty credible. And I think at the same time balancing
(09:02):
that with the ninety seven percent customer satisfaction and for
our staff who are working for us as well, making
sure that they are still engaged. And so we scored
eight point one out of ten in our engagement surveys,
which puts us in the top quartile of healthcare providers
around the world. Getting that mix of sort of financial
performance with good staff satisfaction, with engaged residents enjoying their
(09:27):
lives living in our villages, that sort of trifector of
things is really really important to us. But on the
look on the profit side of things, that was really
driven by the popularity. So we talked before about people's
struggles coming into our villages. But you know, if yet
you look underneath the profit results, new sales were up
about five percent. Resales that's homes that people previously lived in,
(09:50):
they were up twenty percent, So you know, the core
sales for the company was still up twour percent, which
was in a pretty dire property market. So that was
sort of the genesis of the profit performance. At the
same time, we were being pretty careful and cautious about
making sure that we managed spend. Operating costs out there
are pretty crazy for New Zealanders in general, but it's
(10:11):
the same thing for a time village operators. It doesn't
matter whether it's rates, insurance. Trying to constrain some of
those costs as well at the same time as making
sure that we delivered that great experiences sort of key
for us.
Speaker 2 (10:21):
Yeah, I'm just sort of looking around. I guess we've
seen two of your competitors effectively going to private equity,
you know, another one sort of if we're frank struggling
we bit with an equity raise that's just finished. Are
you still ruling out the need for that kind of
capital raise.
Speaker 1 (10:37):
Yeah, look for our growth plans at the moment, we
don't need to raise capital. Essentially, the way ours, our
sort of development cycle works maybe a little bit different
to some of the other operators. So when we build
a broad acre site, essentially it might cost us to
say one hundred and fifty million dollars to build that
site the time. That what our aim is. So when
(10:57):
we buy a piece of land, our aim is essentially
to get all that money back through the first sale
of those homes in that villages. So we won't purchase
a bit of land and start construction if we don't
think we can recycle our money out after we've basically
built a village and sold it down for the first time.
And so we don't as a business have any core
debt that sits there. All our debt is essentially land
(11:20):
working capital for building villages that are half complete, and
then stock that we own when we're just as we're
going to sell it down. So if you think about that,
like if we were, you know, West Case Scenariot to
shut the doors and say we're not going to build
any more homes, the company would have no sort of coredette,
whereas I think you know probably and that we feel
is a bit of a differentiative for us, And so
(11:43):
we can essentially go as fast as we like, as
long as we're sort of keeping in mind that we
want our number one ambition is to sort of recycle
that capital back out of each project.
Speaker 2 (11:54):
You don't feel extra pressure to sort of step it
up a little bit and maybe leverage a little bit
more and go and grow a little quicker.
Speaker 1 (12:00):
And I think there's always a challenge there about can
you build faster? Should we build faster? And I should
we build faster? In Australia, I think as a business
we've just got to do the right thing for the
company at that particular point of time in the cycle.
So you know, we give twelve months guidance on build rates,
but we're not afraid to like slow that down. So
last year, in the first part of the year, you know,
we came out and said, hey, economy is not so good,
property market's a bit harder, We're going to build fifty
(12:21):
less homes. And it's much the same during good time.
Better times, we would do the same thing. We'd sit
there and say, hey, we can't get enough product and
people are cuing up at the door, like let's say
I should build some more homes in each village. And
so it's about of keeping the company really sound and
financially sort of stable for the conditions that you're trading
with in and so we're very remindful of that, and
(12:43):
we meet and have conversations as a leadership team about
things like build rates every six weeks. So that's us
just constantly sitting there and saying what's the economy, doing
what's property market, doing what's house sales like in each
one of our villages, and just applying focus to that constantly.
So it is it. Look, there's always there's always pressure there,
(13:05):
like asn't as a leadership team, we're pretty competitive, want
to build more, want to generate a better return for shareholders.
But at the same time as you're going to be
careful around making sure that the balance sheets always strong
as well.
Speaker 2 (13:17):
I just can't help thinking about the announcements this week
around development contributions and around checking up the roma ye
widely spoken about is good news for people who like
building things? You people who like building things? Is it
good news?
Speaker 1 (13:32):
Look a couple of things there. Development contributions are pretty
pretty burdensome for large operators. If you think about like
the infrastructure for this village and everything we do in
this village. You know, like people probably don't have a
lot of need to kind of access other services throughout Auckland,
(13:54):
which was from what you're paying for with those development contributions.
But it's and look at probably a little bit skeptical
around some of the changes and freeing stuff up and
making it better. Like we've seen the fast track process,
which we've used probably now since COVID there was some
legislative fast track fast track process to build big projects.
And to be honest, that fast tracked projects process is
(14:17):
almost at the point now where it's slower than the
slow track process. And so you know, it's interesting in
that I think sometimes you can see these good intentions
come in, but they need to actually practically work, and
so yeah, the magic and this and that will be
actually how they actually operationalize that in a way that
actually practically works.
Speaker 2 (14:38):
I think.
Speaker 1 (14:39):
So we're in the sidelines and sort of just way
to really I guess.
Speaker 2 (14:42):
I mean, you're a nationwide builder, so the idea that
they're potentially going to simplify things so that there's more
uniform codes around construction just makes a bit more sensible.
Speaker 1 (14:51):
Yeah, look love the theory behind it. And you know,
like we're second largest home developer in New Zealan NOWS
proably wouldn't think for a time of the rotor think
largest th home developed New Zealand. So you know, yeah,
anything that can be done speed stuff up. Essentially, you know,
it's a better use of capital for us, more time
efficient means we can build more villages faster. It is
just in the practicality of with which yeah they implement
(15:15):
this stuff.
Speaker 2 (15:15):
You don't acquire other properties then, really do you? You
don't go into an existing operator and say will heed
you to take you on? What is that a conscious choice?
That's just not part of pretty conscious choice.
Speaker 1 (15:27):
Like the only time we've done that is in Nelson,
we bought a village that the first ten to twenty
homes been built already by another operator, and then when
I brought that off them. But typically if you come
back to that sort of conversation before about the business
model and essentially what we're doing is building those homes
and recycling our money back out of it via selling
them down. If you have to go pay another operator
(15:47):
who's already built a village to purchase their village, you
can't recycle your money back out of that. And so
you would have to keep going to shareholders and saying, hey,
you know, I want to go buye these great set
of retirement villages, but we need some more money for
you to do that. And so when you look at
the merits of that versus organic growth, organic growth is
way more efficient. It generate's a better return because the
(16:10):
investor hasn't had to putting more money in. So yeah,
we our preference most of the time is.
Speaker 2 (16:15):
To build, provided you can get the land.
Speaker 1 (16:18):
Yes, but you know, to be fear on that. We've
got seven thousand homes in our land bank, and so
if you think of us as a business, we've got
seven thousand homes built, So you know, like our landbank
enables us to double in size. And if you think
about through the worst part of the economic cycle last year,
we're building seven hundred homes. Seven hundred homes, you've got
(16:41):
ten years worth of build supply if you kept at
that level. But in ten years time, the size of
the company is going to double. The value of the
company is going to double, and hopefully the shephros for
the shareholders will double as well.
Speaker 2 (16:53):
So it's doubled twice in the time that you've been
with the company, either a CFO and CEO. Is that
about right?
Speaker 1 (17:00):
When I joined, it was two dollars later. Yeah, so yeah,
it's probably four times. Yeah, in terms of assets, I
think it's no, there's no reason why that shouldn't continue
because if you think about, you know, you're building these
assets and effectively there's sort of free assets. Once you've
sold them down the ANTIA the company goes up. And
if you track, you know, the NTIA have a company
(17:20):
relative to our share price, it's a pretty sort of
consistent track. So you know, the moment the share price
is twelve dollars, you know, one would like to believe
and hope that if the companies twice as big in
two years time, maybe the share price might be more
double that and it might be twenty four dollars rather
than twelve dollars. But you know that's if you're sort
of sit if your track over the last twelve years,
that's the sort of history of what the company's been on.
(17:40):
So that's that's the goal that we're chasing.
Speaker 2 (17:44):
Is that achievable just with the kind of organic growth
you're talking about here in New Zealand with the sites
that you've bought most recently, or are you looking increasingly
that you are going to have to make good on
the talk of development, you know, taking those agressive opportunities
perhaps or growth opportunities in Australia.
Speaker 1 (18:02):
Yeah, look, we're pretty comfortable, Like I mean, I think,
you know, doubling the size of the company in ten
years isn't a bad thing, like for a company our
size anyway, it's probably not a bad thing. I don't
want to sound complacent, but I think during the better
times in the property market in New Zealand, you know
you might have ambitions to build exponentially faster in New Zealand.
So we've got the land bank to do that, and
it's pretty well consented. So you know, we don't have
(18:24):
a lot of barriers to stop us building faster because
we're broad acre developers. We've got fifteen villages we're building
any particular point in time. If you chose to build
ten more homes on each village, you know, demand's really high.
All of a sudden you lift the build up one
hundred and fifty homes. That's quite material, right, that's a
twenty percent left and build rate in New Zealand. And
then if you think about our journey in Australia, we've
got seven bits of land there now and opened our
(18:47):
first village last year, open our second village at the
end of this year, open our third village the year after.
That's going to become quite progressive growth journey for us.
And so again five of those sites are consented now,
so that will quite meaningfully become contributed to our aggregate
build rate, and quite a mature way. So last year
(19:09):
we only built ten homes, but in three four five
years time, we'd be building two three hundred homes from Australia,
And so you start taking sort of those in aggregating together.
And not only is this sort of growth, but there's
probably quite a large level of exponential growth that's an
opportunity for us as well.
Speaker 2 (19:24):
I suppose we've rered to talk about the demand side
of all of that. We're all getting older, all of us, apparently,
are we still on track? What to sort of hit?
I think something like a million people over seventy five
by when twenty thirty forty years.
Speaker 1 (19:37):
Yeah, Look, essentially by twenty forty the population goes from
four hundred thousand ye Zealanders over seventy five to eight
hundred thousand year Zealanders over seventy five. It's a massive
change in the demographic and I think even by twenty
thirty the number of eighty five year olds goes up
by one hundred and twenty five thousand, and so like
(20:00):
it's pretty quack like it's pretty close by now. If
you think in the next five years, one hundred and
twenty five thousand extra people. You know, like we need
something like thirteen thousand extra year beds in this country
just to cope with that demand in the next five years.
Speaker 2 (20:14):
So we're getting older. But the stats would also tell
us that an increasing number of people work past sixty five,
which is the point we'd retire, and lots of people
want to stay in their own homes. So where's the evidence.
I suppose that there is a really big wave of
people that would be looking for the kind of opportunity
that's offered in a place like like a summer set
(20:35):
retirement village.
Speaker 1 (20:36):
Look might I've been in the company for probably twelve
years now, and it's interesting, like you sort of see
as change in medication, you know, advancements in medicine in
terms of people with the way they live their life
sort of has changed quite a bit last ten twelve years.
But for us, like if you sort of correlate to
their average entry age, it's probably lifted up about one
or two years at the same time. So there's definitely
(20:58):
a drift as people live there life and live it
in healthy conditions, healthy state that they take a choice
to come in maybe slightly later, but it's not like
I don't think you see a massive trend of like
people suddenly coming into retire religious sort of ten years
later than what they previously did. It's a very slow
(21:18):
sort of drift. And if you could have come back
to the sort of reasons why people come in, it's
often safety security, mums struggling to get up the stairs anymore,
Dad doesn't want to mode lawns. Those things still happening
in your life at a certain point in time. It's
just you know, as at seventy nine or as at
eighty one, you know, like and so I don't think
there's going to be a mess of philosophical change to
(21:39):
the age when people enter into villages. And if you
look at that, just the sheer numbers of that demographic stuff,
you know, like it's literally going to double the next
fifteen years. You know, like even if you get a
small drift, they're the massive demographic push. I think you're
going to find that this is not enough for timement
village operators in New Zealand and five ten years time. Wow,
(22:00):
certainly there's going to be not enough gear beds in
New Zealand, which is which is actually pretty sad.
Speaker 2 (22:04):
We've got the model for it, we've got the funding
for it here in New Zealand. We're going to support
people through through those needy years. Aged care we've got, yeah,
we've got and we've got the retirement settings right.
Speaker 1 (22:14):
Yeah, retirement settings I think are good luck. There's a
bit of work to be done. The sector is pretty
folcused around making some changes legislatively to retire for the sector,
to just clean up some practice from some of the
operators in there, and to be fear's it's a very
small minority such of things like you know, charging maintenance
(22:34):
fees after people leave, or continuing to charge weekly fees
after people leave. There's a bunch of little things like
that which are probably not working quite as well as
they should be at the moment. But generally it's pretty good.
Aged care in New Zealand is pretty broken at the moment,
so that is significantly underfunded. There is going to be
a massive shortage of beds in five ten years time
(22:56):
in New Zealand, and you know, no one's building because
aged care is horrendously harding the funded at the moment.
So you know, I think that is a challenge for
New Zealanders.
Speaker 2 (23:08):
So as a business, you were just literally offering it
as part of the proposition for the people that are
part of you.
Speaker 1 (23:13):
Can we are Yeah, Look, we used to build slightly
bigger facilities to cater for people to come in straight
from a time of need independently into the village, but
now because the economics and the lack of health news
and funding for that, we're really just predominantly focusing on
having enough bets to cater for people living their lives
within our villages. And look, there's a synergy with us
(23:36):
around continuing to make those those care fasilies smaller and
more homely as well, which is great as well, but
predominantly that's driven also by a lack of funding.
Speaker 2 (23:45):
Scott, you were a CFO, you become a CEO, A
bit of a switch.
Speaker 1 (23:53):
Yeah, look at is quite different. My exec team would
tease me about at times you've gone from being an
no man, which is being the CFO role, and going
to be a yes man and the CFO and the
CEO role, I should say, but it's Look, it's different.
I think you're in the CEO role you're trying to
balance off expectations of residents and you're trying to make
(24:16):
their environment lovely and enjoyable, and you know there are
biggest advocates out there. You're trying to make sure staff
as you really enjoy working for the company and feel
like they're actually doing some good and at the same time,
you're trying to bounce off that shareholder expectation. So you're
trying to get that balance right. And at times, I
spend a lot of my time going out to the
villigious talking to residents, and you're almost like, rather than
(24:40):
being CE, you're the chief customer advocate for the organization,
and that's really enjoyable, Like it's real privileged to be
able to do that for the organization at time at times,
but yeah, it's it's certainly different from being CFO.
Speaker 2 (24:56):
Does it leave any time at all for you to
tinker away with your vintage cars? Classic cars? I should
add rather.
Speaker 1 (25:01):
Yeah, Look, I have least classic cars now than I
did because my son's racing and doing motorsports, so I
had to sell a couple of my cars to pay
for his race car. So but I do have a
sixty seven Mustang, which it's been with me for twenty
five years. My wife would probably tease me and say
I love it more than I do my family.
Speaker 2 (25:20):
But that is not right.
Speaker 1 (25:22):
But yeah, it's part of the family.
Speaker 2 (25:24):
Fantastic. Hey, it's been lovely spending some time with you.
Thanks very much, Thanks for watching and for listening. I'm excited.
It looks like it's Scott's shout. I finally get that
shared lunch.
Speaker 3 (25:34):
Call me too,
Essentially by twenty forty the population goes from four hundred
thousand New Zealanders over seventy five to eight hundred thousand
New Zealanders over seventy five. It's massive change in gemographic
We're second largest home developer in New Zealand. I's aren't
think for a time, but is the largest home developer
in New Zealand. Yeah. Anything that can be done to speed stuff,
are your time efficient means I can building villages faster. Yeah,
(00:22):
the massive demographic push, I think you're going to find
that this is not enough retirement village operators in New
Zealand and fifteen years time and certainly there's going to
be not enough care be it's in New Zealand, which
is actually pretty sad.
Speaker 2 (00:36):
Krakoto. Welcome to Shared Lunch, brought to you by Shears's.
I'm Garth Bray and today we're here in Saint John's
in Auckland at the newest retirement village opened by Somerset.
Now that's one of the three big listed operators of
retirement villages in New Zealand, and we're here to speak
to the CEO Scott's Schooler. More than fifty thousand New
Zealanders call a retirement village home, but that is set
(00:57):
to rise as our population ages. So what are Sumrset's
plans to get a hit of that curve? Before I
head up to the Penthouse to hear here's some important
information you should always consider when investing.
Speaker 3 (01:10):
Investing involves the risk you might lose the money you
start with, we recommend talking to a licensed financial advisor.
We also recommend reading product disclosure documents before deciding to invest.
Everything you're about to see and here is current at
the time of recording.
Speaker 2 (01:25):
Scott, thanks for having us to the Penthouse. From the
look of it, where are we bright now? What is
the spot and what can taust about it? Yes?
Speaker 1 (01:33):
So look we bought the site and s John's probably
twenty fifth day now and so it's been a long
journey for us to get to this point where it's
open and opened late last year. So yet it's going
to be home to break close to three hundred residents. Good,
so you're in a pink house. It's having there pretty
much for sites got three sixty degree of view start.
(01:55):
It's a lovely, lovely sites amazing as.
Speaker 2 (01:59):
Views and if you are looking to try to arrive
in this kind of place obviously going to have to
have a pretty good financial plan.
Speaker 1 (02:06):
Yes, so that's a lovely part about this collection. We
tried to sort of match like aspiration and make it
quite aspirational. So like hopefully when people been up here
they feel like it's buk turning up to a hotel.
It's at Fields Groove Formal. It has a lot appeal
to it. It's got flop fine dining and it's got cafe,
it's got heavy theaters, gyms, all the subur pools, things
(02:27):
you can think of. The vast majority of the product
probably arranges them about which there's a lot for parts
of New Zealand. But like an Auckland's actually in this
location is actually pretty portable because.
Speaker 2 (02:38):
You tend to match whatever offering you make here to
whatever local proppery prices are doing because that's where people
are coming from.
Speaker 1 (02:46):
Yeah, Essentially, like most people come into a time village
within either two situations, either within a five K radios
where they lived their lives or typically then they may
be chaking a choice to move from a completely different
location to be closer to family. But you'd find eighty
percent of people would be within five kilometers, so you
kind of want it to be highly affordable for those
people to be able to sell their home, put a
(03:06):
little bit of money in the bank and then come
in and use that money to sort of enjoy retirement life.
And so most of the time we're target ninety percent
eighty five to ninety percent of the medium house price
in terms of the products that we're building.
Speaker 2 (03:21):
It's interesting you mentioned that chain of needing to sell
before you come into a place like this, because obviously
the market's been a weabit so though probably more so
than anywhere here in Auckland. How is that showing up.
Speaker 1 (03:32):
Yeah, Look, I think your right to pickle on the
fact that I think people who's confidence to be able
to sell their house has been quite constrained in the
last twelve months, that hasn't really sort of borne out
in terms of their desire to come into a village.
So we've seen lots of inquiry, like we would have
seen more inquiry the last twelve months than we have
traditionally previously. So inquiries pretty by people's commitment to sales
(03:53):
contract is really high, but they've been constrained at ticks.
Why they're a bulleted sell our own home and so
look some of that as people take choice to sort
of sit on the beach and wake three months six months,
but until they feel like they can actually sell their house.
Sometimes we'll work with that resident to give them options
to come in. So it might be like we have
situations we will allow people to move in early. They
can move in whilst they're still selling their home, get settled,
(04:16):
which is really lovely for them, and then be out
of the house while they're selling it. And so you know,
at times we'll give them six months to do that,
and that gives them the confidence to sort of say, right,
I'm prepared to give that a go in some of
my house and look, at the end of that six
months period, if they still and sold their house, would
work with them. It's not like they're going to get
kicked out on the street, you know, like we want
them to be living life here. And so you're just
(04:38):
constantly working with people in their individual situations to figure
out how you can help facilitate them coming in. And
that's been hard. But with your economy in the last
sort of six twelve months, it's not as I said,
that people's desire to come and has changed. It's as
you're just helping them sort of make that transition.
Speaker 2 (04:53):
Those terms, Are they kind of a new response to
the conditions or is that something you've gone to before
in other times where things are tricky because you've been
around for a while, right as a company.
Speaker 1 (05:02):
Look, it's a good question. Most of them are things
that you've used in the past. So, like you know,
during COVID twenty twenty, it was the same sort of environment, right,
people were predicting housing market it was going to be terrible,
and to be honest, it wasn't actually as bad as
people predicted. But it's those same types of tools that
you pull out that just facilitate people to come into
a village.
Speaker 2 (05:20):
I guess if you can tell me a bit more
about Somerset particularly, like what would I see here that
I wouldn't see it another retirement village operator's place.
Speaker 1 (05:30):
Yeah, Look, there's a few parts I think, like in
terms of what we're proud of. Like the first one
is we sort of pride ourselves that you come and
live in a village where it's actually your home, so
we treated as residents' homes. So like when our staff
are here, they're ver even mindful of this is actually
people's homes that they're sort of working with them. I
think potentially that could be a different philosophy from other operators,
(05:51):
where it's sort of more like this is our village,
you're come to live with us, so you know, pretty
much we stand in the background, facilitated as much as
we can, but you know, almost try and be an
extended member of their family to help out and stuff.
But and so I think service like residents love their
lives in our villages. Ninety seven percent of our residents
are satisfied living in some set village, so we're very
(06:13):
proud of that. The second thing is we build on
a lot of Broadway locations, so you know, I think
a lot of Keywis have grown up with the six
and re scumiter section the grass. That's something we we
like and enjoy building. So you know you'll see us
in broad acre situations right throughout New Zealand. So we're
probably the most geographically diverse of any operator throughout New
(06:34):
Zealand and like to build homes that people can actually
enjoy but agree in space obviously, when you come to
a special place like this, you know you can't actually
do that because you can't get enough land bututical village.
But yeah, we are in a vertical village and we
sort of only build one of those, probably eading a
particular point in time, but most of the time it's
broad acre villages. And the bit I love about that
is that people got access to outdoor living pocket parks
(06:57):
like barbecue is you name it, like mini gulf driving ranges,
like there's just it's NonStop sort of ability for them
to exist things and so we'll it be vegetable gardens
is something the fever in and people's ability to then
jump out of their home out the back door and
kind of have their own little pattio area and stuff
(07:19):
they can enjoy, their own little grass patch they can
enjoys is quite special. So yeah, I think like there's
a couple of things there, like you know, and I
think probably the third thing i'd say is in kre
like you know, we have integrated villages with care access
on site and with that that's probably not that's pretty
typical for New Zealand. Look, it's quite different for Australia,
(07:41):
so we are quite different Australia on that regard. But
in New Zealand, like here, we try and produce quite small,
private homely care environments. So because when people are going
through the latter part of their life and they need
some care and support, I know, we feel like it's
really important that they feel that that's an environment they're
(08:03):
sort of safe, comfortable in. It's private, they have the
same nurse every day, they have the same care giver
every day, rather than a large hospital environment where each
day you might be experiencing a different person looking after you,
or you've got no privacy in the lounge because there's
forty other people in there. So small private care facilities
combined with broad acre living, combined with that sort of
(08:26):
like lovely sort of service environment that we create, I
think is kind of the three things that probably the
most important to someone.
Speaker 2 (08:33):
Sat. All right, how's that working for the financials? Can
you walk us through the numbers? I know you've you've
fived you're half year pretty recently, so they'll all be fresh.
I'm sure.
Speaker 1 (08:41):
Yeah. Look here last year, so we delivered our undern
profit result of to earn six million dollars. That was
up eight percent and to be honest, op eight percent
in what i'd probably are my working career anyway, it's
probably the hardest year I've experienced, and so for us
to deliver a result up eight percenters, we feel is
pretty credible. And I think at the same time balancing
(09:02):
that with the ninety seven percent customer satisfaction and for
our staff who are working for us as well, making
sure that they are still engaged. And so we scored
eight point one out of ten in our engagement surveys,
which puts us in the top quartile of healthcare providers
around the world. Getting that mix of sort of financial
performance with good staff satisfaction, with engaged residents enjoying their
(09:27):
lives living in our villages, that sort of trifector of
things is really really important to us. But on the
look on the profit side of things, that was really
driven by the popularity. So we talked before about people's
struggles coming into our villages. But you know, if yet
you look underneath the profit results, new sales were up
about five percent. Resales that's homes that people previously lived in,
(09:50):
they were up twenty percent, So you know, the core
sales for the company was still up twour percent, which
was in a pretty dire property market. So that was
sort of the genesis of the profit performance. At the
same time, we were being pretty careful and cautious about
making sure that we managed spend. Operating costs out there
are pretty crazy for New Zealanders in general, but it's
(10:11):
the same thing for a time village operators. It doesn't
matter whether it's rates, insurance. Trying to constrain some of
those costs as well at the same time as making
sure that we delivered that great experiences sort of key
for us.
Speaker 2 (10:21):
Yeah, I'm just sort of looking around. I guess we've
seen two of your competitors effectively going to private equity,
you know, another one sort of if we're frank struggling
we bit with an equity raise that's just finished. Are
you still ruling out the need for that kind of
capital raise.
Speaker 1 (10:37):
Yeah, look for our growth plans at the moment, we
don't need to raise capital. Essentially, the way ours, our
sort of development cycle works maybe a little bit different
to some of the other operators. So when we build
a broad acre site, essentially it might cost us to
say one hundred and fifty million dollars to build that
site the time. That what our aim is. So when
(10:57):
we buy a piece of land, our aim is essentially
to get all that money back through the first sale
of those homes in that villages. So we won't purchase
a bit of land and start construction if we don't
think we can recycle our money out after we've basically
built a village and sold it down for the first time.
And so we don't as a business have any core
debt that sits there. All our debt is essentially land
(11:20):
working capital for building villages that are half complete, and
then stock that we own when we're just as we're
going to sell it down. So if you think about that,
like if we were, you know, West Case Scenariot to
shut the doors and say we're not going to build
any more homes, the company would have no sort of coredette,
whereas I think you know probably and that we feel
is a bit of a differentiative for us, And so
(11:43):
we can essentially go as fast as we like, as
long as we're sort of keeping in mind that we
want our number one ambition is to sort of recycle
that capital back out of each project.
Speaker 2 (11:54):
You don't feel extra pressure to sort of step it
up a little bit and maybe leverage a little bit
more and go and grow a little quicker.
Speaker 1 (12:00):
And I think there's always a challenge there about can
you build faster? Should we build faster? And I should
we build faster? In Australia, I think as a business
we've just got to do the right thing for the
company at that particular point of time in the cycle.
So you know, we give twelve months guidance on build rates,
but we're not afraid to like slow that down. So
last year, in the first part of the year, you know,
we came out and said, hey, economy is not so good,
property market's a bit harder, We're going to build fifty
(12:21):
less homes. And it's much the same during good time.
Better times, we would do the same thing. We'd sit
there and say, hey, we can't get enough product and
people are cuing up at the door, like let's say
I should build some more homes in each village. And
so it's about of keeping the company really sound and
financially sort of stable for the conditions that you're trading
with in and so we're very remindful of that, and
(12:43):
we meet and have conversations as a leadership team about
things like build rates every six weeks. So that's us
just constantly sitting there and saying what's the economy, doing
what's property market, doing what's house sales like in each
one of our villages, and just applying focus to that constantly.
So it is it. Look, there's always there's always pressure there,
(13:05):
like asn't as a leadership team, we're pretty competitive, want
to build more, want to generate a better return for shareholders.
But at the same time as you're going to be
careful around making sure that the balance sheets always strong
as well.
Speaker 2 (13:17):
I just can't help thinking about the announcements this week
around development contributions and around checking up the roma ye
widely spoken about is good news for people who like
building things? You people who like building things? Is it
good news?
Speaker 1 (13:32):
Look a couple of things there. Development contributions are pretty
pretty burdensome for large operators. If you think about like
the infrastructure for this village and everything we do in
this village. You know, like people probably don't have a
lot of need to kind of access other services throughout Auckland,
(13:54):
which was from what you're paying for with those development contributions.
But it's and look at probably a little bit skeptical
around some of the changes and freeing stuff up and
making it better. Like we've seen the fast track process,
which we've used probably now since COVID there was some
legislative fast track fast track process to build big projects.
And to be honest, that fast tracked projects process is
(14:17):
almost at the point now where it's slower than the
slow track process. And so you know, it's interesting in
that I think sometimes you can see these good intentions
come in, but they need to actually practically work, and
so yeah, the magic and this and that will be
actually how they actually operationalize that in a way that
actually practically works.
Speaker 2 (14:38):
I think.
Speaker 1 (14:39):
So we're in the sidelines and sort of just way
to really I guess.
Speaker 2 (14:42):
I mean, you're a nationwide builder, so the idea that
they're potentially going to simplify things so that there's more
uniform codes around construction just makes a bit more sensible.
Speaker 1 (14:51):
Yeah, look love the theory behind it. And you know,
like we're second largest home developer in New Zealan NOWS
proably wouldn't think for a time of the rotor think
largest th home developed New Zealand. So you know, yeah,
anything that can be done speed stuff up. Essentially, you know,
it's a better use of capital for us, more time
efficient means we can build more villages faster. It is
just in the practicality of with which yeah they implement
(15:15):
this stuff.
Speaker 2 (15:15):
You don't acquire other properties then, really do you? You
don't go into an existing operator and say will heed
you to take you on? What is that a conscious choice?
That's just not part of pretty conscious choice.
Speaker 1 (15:27):
Like the only time we've done that is in Nelson,
we bought a village that the first ten to twenty
homes been built already by another operator, and then when
I brought that off them. But typically if you come
back to that sort of conversation before about the business
model and essentially what we're doing is building those homes
and recycling our money back out of it via selling
them down. If you have to go pay another operator
(15:47):
who's already built a village to purchase their village, you
can't recycle your money back out of that. And so
you would have to keep going to shareholders and saying, hey,
you know, I want to go buye these great set
of retirement villages, but we need some more money for
you to do that. And so when you look at
the merits of that versus organic growth, organic growth is
way more efficient. It generate's a better return because the
(16:10):
investor hasn't had to putting more money in. So yeah,
we our preference most of the time is.
Speaker 2 (16:15):
To build, provided you can get the land.
Speaker 1 (16:18):
Yes, but you know, to be fear on that. We've
got seven thousand homes in our land bank, and so
if you think of us as a business, we've got
seven thousand homes built, So you know, like our landbank
enables us to double in size. And if you think
about through the worst part of the economic cycle last year,
we're building seven hundred homes. Seven hundred homes, you've got
(16:41):
ten years worth of build supply if you kept at
that level. But in ten years time, the size of
the company is going to double. The value of the
company is going to double, and hopefully the shephros for
the shareholders will double as well.
Speaker 2 (16:53):
So it's doubled twice in the time that you've been
with the company, either a CFO and CEO. Is that
about right?
Speaker 1 (17:00):
When I joined, it was two dollars later. Yeah, so yeah,
it's probably four times. Yeah, in terms of assets, I
think it's no, there's no reason why that shouldn't continue
because if you think about, you know, you're building these
assets and effectively there's sort of free assets. Once you've
sold them down the ANTIA the company goes up. And
if you track, you know, the NTIA have a company
(17:20):
relative to our share price, it's a pretty sort of
consistent track. So you know, the moment the share price
is twelve dollars, you know, one would like to believe
and hope that if the companies twice as big in
two years time, maybe the share price might be more
double that and it might be twenty four dollars rather
than twelve dollars. But you know that's if you're sort
of sit if your track over the last twelve years,
that's the sort of history of what the company's been on.
(17:40):
So that's that's the goal that we're chasing.
Speaker 2 (17:44):
Is that achievable just with the kind of organic growth
you're talking about here in New Zealand with the sites
that you've bought most recently, or are you looking increasingly
that you are going to have to make good on
the talk of development, you know, taking those agressive opportunities
perhaps or growth opportunities in Australia.
Speaker 1 (18:02):
Yeah, look, we're pretty comfortable, Like I mean, I think,
you know, doubling the size of the company in ten
years isn't a bad thing, like for a company our
size anyway, it's probably not a bad thing. I don't
want to sound complacent, but I think during the better
times in the property market in New Zealand, you know
you might have ambitions to build exponentially faster in New Zealand.
So we've got the land bank to do that, and
it's pretty well consented. So you know, we don't have
(18:24):
a lot of barriers to stop us building faster because
we're broad acre developers. We've got fifteen villages we're building
any particular point in time. If you chose to build
ten more homes on each village, you know, demand's really high.
All of a sudden you lift the build up one
hundred and fifty homes. That's quite material, right, that's a
twenty percent left and build rate in New Zealand. And
then if you think about our journey in Australia, we've
got seven bits of land there now and opened our
(18:47):
first village last year, open our second village at the
end of this year, open our third village the year after.
That's going to become quite progressive growth journey for us.
And so again five of those sites are consented now,
so that will quite meaningfully become contributed to our aggregate
build rate, and quite a mature way. So last year
(19:09):
we only built ten homes, but in three four five
years time, we'd be building two three hundred homes from Australia,
And so you start taking sort of those in aggregating together.
And not only is this sort of growth, but there's
probably quite a large level of exponential growth that's an
opportunity for us as well.
Speaker 2 (19:24):
I suppose we've rered to talk about the demand side
of all of that. We're all getting older, all of us, apparently,
are we still on track? What to sort of hit?
I think something like a million people over seventy five
by when twenty thirty forty years.
Speaker 1 (19:37):
Yeah, Look, essentially by twenty forty the population goes from
four hundred thousand ye Zealanders over seventy five to eight
hundred thousand year Zealanders over seventy five. It's a massive
change in the demographic and I think even by twenty
thirty the number of eighty five year olds goes up
by one hundred and twenty five thousand, and so like
(20:00):
it's pretty quack like it's pretty close by now. If
you think in the next five years, one hundred and
twenty five thousand extra people. You know, like we need
something like thirteen thousand extra year beds in this country
just to cope with that demand in the next five years.
Speaker 2 (20:14):
So we're getting older. But the stats would also tell
us that an increasing number of people work past sixty five,
which is the point we'd retire, and lots of people
want to stay in their own homes. So where's the evidence.
I suppose that there is a really big wave of
people that would be looking for the kind of opportunity
that's offered in a place like like a summer set
(20:35):
retirement village.
Speaker 1 (20:36):
Look might I've been in the company for probably twelve
years now, and it's interesting, like you sort of see
as change in medication, you know, advancements in medicine in
terms of people with the way they live their life
sort of has changed quite a bit last ten twelve years.
But for us, like if you sort of correlate to
their average entry age, it's probably lifted up about one
or two years at the same time. So there's definitely
(20:58):
a drift as people live there life and live it
in healthy conditions, healthy state that they take a choice
to come in maybe slightly later, but it's not like
I don't think you see a massive trend of like
people suddenly coming into retire religious sort of ten years
later than what they previously did. It's a very slow
(21:18):
sort of drift. And if you could have come back
to the sort of reasons why people come in, it's
often safety security, mums struggling to get up the stairs anymore,
Dad doesn't want to mode lawns. Those things still happening
in your life at a certain point in time. It's
just you know, as at seventy nine or as at
eighty one, you know, like and so I don't think
there's going to be a mess of philosophical change to
(21:39):
the age when people enter into villages. And if you
look at that, just the sheer numbers of that demographic stuff,
you know, like it's literally going to double the next
fifteen years. You know, like even if you get a
small drift, they're the massive demographic push. I think you're
going to find that this is not enough for timement
village operators in New Zealand and five ten years time. Wow,
(22:00):
certainly there's going to be not enough gear beds in
New Zealand, which is which is actually pretty sad.
Speaker 2 (22:04):
We've got the model for it, we've got the funding
for it here in New Zealand. We're going to support
people through through those needy years. Aged care we've got, yeah,
we've got and we've got the retirement settings right.
Speaker 1 (22:14):
Yeah, retirement settings I think are good luck. There's a
bit of work to be done. The sector is pretty
folcused around making some changes legislatively to retire for the sector,
to just clean up some practice from some of the
operators in there, and to be fear's it's a very
small minority such of things like you know, charging maintenance
(22:34):
fees after people leave, or continuing to charge weekly fees
after people leave. There's a bunch of little things like
that which are probably not working quite as well as
they should be at the moment. But generally it's pretty good.
Aged care in New Zealand is pretty broken at the moment,
so that is significantly underfunded. There is going to be
a massive shortage of beds in five ten years time
(22:56):
in New Zealand, and you know, no one's building because
aged care is horrendously harding the funded at the moment.
So you know, I think that is a challenge for
New Zealanders.
Speaker 2 (23:08):
So as a business, you were just literally offering it
as part of the proposition for the people that are
part of you.
Speaker 1 (23:13):
Can we are Yeah, Look, we used to build slightly
bigger facilities to cater for people to come in straight
from a time of need independently into the village, but
now because the economics and the lack of health news
and funding for that, we're really just predominantly focusing on
having enough bets to cater for people living their lives
within our villages. And look, there's a synergy with us
(23:36):
around continuing to make those those care fasilies smaller and
more homely as well, which is great as well, but
predominantly that's driven also by a lack of funding.
Speaker 2 (23:45):
Scott, you were a CFO, you become a CEO, A
bit of a switch.
Speaker 1 (23:53):
Yeah, look at is quite different. My exec team would
tease me about at times you've gone from being an
no man, which is being the CFO role, and going
to be a yes man and the CFO and the
CEO role, I should say, but it's Look, it's different.
I think you're in the CEO role you're trying to
balance off expectations of residents and you're trying to make
(24:16):
their environment lovely and enjoyable, and you know there are
biggest advocates out there. You're trying to make sure staff
as you really enjoy working for the company and feel
like they're actually doing some good and at the same time,
you're trying to bounce off that shareholder expectation. So you're
trying to get that balance right. And at times, I
spend a lot of my time going out to the
villigious talking to residents, and you're almost like, rather than
(24:40):
being CE, you're the chief customer advocate for the organization,
and that's really enjoyable, Like it's real privileged to be
able to do that for the organization at time at times,
but yeah, it's it's certainly different from being CFO.
Speaker 2 (24:56):
Does it leave any time at all for you to
tinker away with your vintage cars? Classic cars? I should
add rather.
Speaker 1 (25:01):
Yeah, Look, I have least classic cars now than I
did because my son's racing and doing motorsports, so I
had to sell a couple of my cars to pay
for his race car. So but I do have a
sixty seven Mustang, which it's been with me for twenty
five years. My wife would probably tease me and say
I love it more than I do my family.
Speaker 2 (25:20):
But that is not right.
Speaker 1 (25:22):
But yeah, it's part of the family.
Speaker 2 (25:24):
Fantastic. Hey, it's been lovely spending some time with you.
Thanks very much, Thanks for watching and for listening. I'm excited.
It looks like it's Scott's shout. I finally get that
shared lunch.
Speaker 3 (25:34):
Call me too,
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